Electric Car Maker Tesla makes 100,000 units of "2170 Cell" peryear in its Nevada based gigafactory for use in Model 3 Electriccar. Data concerning the unit production costs of the "2170 Cell"are as below:

Elon is considering whether its worth making the cell in itsfactory or outsource it. An outside supplier has offered to sellTesla all of the "2170 Cell" it requires. If Tesla decides todiscontinue making the cells, 25% of the above fixed manufacturingoverhead costs could be avoided. Assume that direct labor anddirect materials are variable cost.

Required:
a. Assume Tesla has no alternative use for the facilities presentlydevoted to production of the "2170 Cell" . If the outside supplieroffers to sell the "2170 Cell" for $0.46 each, should Tesla acceptthe offer? Fully support your answer with appropriate calculations.(6 Points)

b. Assume that Tesla could use the facilities presently devoted toproduction of the "2170 Cell" to expand production of anotherproduct that would yield an additional contribution margin of$20,000 annually. What is the maximum price Tesla should be willingto pay the outside supplier for "2170 Cell" ? (4 Points)

Direct Materials $0.15 Direct Labor 0.10 Variable Manufacturing Overhead 0.13 Fixed Manufacturing Overhead 0.48 Total Manufacturing Cost per unit $0.86